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  3. California State University - San Diego State University
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  5. Acctg 201 (ACCT116A)

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Basics of Accounting Concepts
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Accounting is an information system that tracks and communicates business activities, while managerial accounting focuses on areas like cost accounting and internal auditing, with most opportunities found in private accounting. Key accounting concepts include principles such as revenue recognition ...

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  • January 26, 2025
  • 6
  • 2023/2024
  • Class notes
  • Marc lafond
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‭Chapter 1 Accounting Concepts‬
-‭ ‬ ‭ ecordkeeping: The recording of transactions and events only, either manually or electronically‬
R
‭-‬ ‭Accounting: is an information and measurement system that identifies, records, and‬
‭communicates relevant, reliable, and comparable information about an organization's business‬
‭activities.‬
‭-‬ ‭Managerial Accounting: blank includes opportunities in general accounting, cost accounting and‬
‭internal auditing.‬
-‭ ‬ ‭The majority of accounting opportunities are in private accounting.‬
‭-‬ ‭Accounting certifications include CPA‬
‭-‬ ‭preferred course of action in making an ethical decision: Identify ethical concerns; Analyze‬
‭options; Make ethical decision.‬
‭-‬ ‭In the fraud triangle, when a person feels an incentive to commit fraud, this is referred to as‬
‭pressure.‬
‭-‬ ‭The organization that is primarily responsible for developing GAAP for use by all U.S.‬
‭companies is the FASBx‬
‭-‬ ‭The organization that is responsible for issuing International Financial Reporting Standards is the‬
‭IASB‬
‭-‬ ‭Principles‬
‭-‬ ‭Measurement principles: Accounting information based on actual cost.‬
‭-‬ ‭Full disclosure principle: A company reports the details behind financial statements that‬
‭would impact user’s decisions.‬
‭-‬ ‭Revenue recognition: revenue is recognized when goods are provided to the customer at‬
‭the amount expected to be received.‬
‭-‬ ‭Expense recognition: A company records the expenses incurred to generate the revenue‬
‭reported.‬
‭-‬ ‭Assumptions‬
‭-‬ ‭Going concern: presumes that the business will continue operating in the future‬
‭-‬ ‭Monetary unit: transactions and events are expressed in units of money‬
‭-‬ ‭Time period: the life of the company can be divided into specific time periods‬
‭-‬ ‭Business entity: a business is accounted for separately from other business entities and its‬
‭owner‬
‭-‬ ‭EQUATIONS‬
‭-‬ ‭Assets (total resources)‬‭=‬‭Liabilities (claims on‬‭resources by nonowners)‬‭+‬‭equity (claims‬
‭on resources by owners)‬
‭-‬ ‭Assets = liabilities + contributed capital +‬‭retained‬‭earnings‬
‭-‬ ‭Assets: liabilities + (‬‭common stock - dividends +‬‭revenues - expenses‬‭)‬
‭-‬ ‭Business activities‬
‭-‬ ‭Events: Happenings that affect the accounting equation‬
‭-‬ ‭External Transactions: Exchanges of value between two entities‬
‭-‬ ‭Internal Transactions: Exchanges within an entity‬
-‭ ‬ ‭Investing into common stock will also increase equity‬
‭-‬ ‭The four basic financial statements‬

, ‭-‬ ‭Income statement:‬
‭-‬ ‭revenue, expenses, and net income‬
‭-‬ ‭Income statement equation:‬‭revenues - expenses = net‬‭income (loss)‬
‭-‬ ‭Statement of retained earnings:‬
‭-‬ ‭Statement of retained earnings equation:‬‭beginning‬‭retained earnings + net‬
‭income (or -loss) - dividends = ending retained earnings‬
‭-‬ ‭Balance sheet‬
‭-‬ ‭Balance Sheet Equation‬‭: assets = liabilities + equity‬
‭-‬ ‭Statement of cash flows‬
‭-‬ ‭Statement of cash flows equation:‬‭beginning cash +‬‭net cash from operating‬
‭activities + net cash from investing activities + net cash from financing activities‬
‭= ending cash‬
‭-‬ ‭Return on assets measures a company’s ability to generate an adequate return on its investment in‬
‭assets.‬
‭-‬ ‭EQUATION‬‭: Return on assets = Net income / Average‬‭total assets‬
‭-‬ ‭Average total assets = (beginning total assets + ending total assets) / 2‬
‭-‬


‭Ch # 2 Accounting Concepts‬
‭-‬ ‭Source Documents:‬
‭-‬ ‭Telephone bill‬
‭-‬ ‭Sales receipt‬
‭-‬ ‭Invoice from supplier‬
‭-‬ ‭Bank statement‬
‭-‬ ‭Financial Statements:‬
‭-‬ ‭Trial balance: A trial balance is a list of accounts from the ledger showing their‬
‭debit or credit balances in separate columns. The trial balance is a summary of the‬
‭ledger’s contents and is useful in preparing financial statements and in revealing‬
‭recordkeeping errors.‬
‭-‬ ‭income statement‬
‭-‬ ‭A record of the increases and decreases in a specific account is an "Account"‬
‭-‬ ‭Prepaid advertising is an account that is a asset‬
‭-‬ ‭Accounts payable is a liability account‬
‭-‬ ‭Common stock is an equity account‬
‭-‬ ‭A general ledger contains all of the accounts that a company uses, along with detail of the‬
‭balances in those.‬
‭-‬ ‭Chart of Accounts:‬
‭-‬ ‭Different companies will use different charts of accounts based on individual‬
‭company need.‬
‭-‬ ‭The chart of accounts should be ordered in a logical sequence based on the type of‬
‭account.‬

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